2019 (8) TMI 1895 - HC - Indian Laws

DRT lacks power to frame preliminary issues except when jurisdiction challenged, petition dismissed

The Gujarat HC dismissed a petition seeking direction to the Debts Recovery Tribunal to frame preliminary issues. The court held that while DRT generally ... Recovery of dues - seeking a direction to the Debts Recovery Tribunal-1, Ahmedabad to frame, consider and decide as preliminary issues, the issues raised by the petitioners in their pleadings of Original Application. Whether the Debts Recovery Tribunal is empowered to decide issues as preliminary issues? - HELD THAT:- Prima facie, the Act does not contemplate deciding issues as preliminary issues by the Debts Recovery Tribunal. This is more so considering the object behind the enactment, viz., setting up of Special Tribunals for recovery of dues of the banks and financial institutions by following a summary procedure. The intention of the legislature in enacting the Act is to provide for expeditious adjudication and recovery of debts due to banks and financial institutions; therefore, if all the provisions of the Code are applied to proceedings before the Debts Recovery Tribunal, it would defeat the very object of the enactment. Nonetheless, while ordinarily the Debts Recovery Tribunal should not decide issues as preliminary issues, in the opinion of this court, if the issue raised is one which goes to the root of the matter and strikes at the very jurisdiction of the Tribunal to decide the application, the court is of the view that the Tribunal is not barred from deciding such issue as a preliminary issue merely because section 22 of the Act does not specifically refer to the power to frame and decide preliminary issues. However, such power should be exercised sparingly, only in cases where the question of the jurisdiction of the Debts Recovery Tribunal to decide the case is involved. Whether the issues proposed by the petitioners can be said to be pure questions of law? - HELD THAT:- In the present case, the petitioners do not admit that the averments made in the application under section 19 of the Act are true. However, they contend that because the petitioners (original defendants) admitted the documents on which the respondents (original applicants) rely, they are entitled to raise a plea in the nature of demurer. In the opinion of this court, such plea of demurer would be available to the petitioners if they had admitted the averments made in the application and the questions were required to be decided on the basis thereof. However, the preliminary issues proposed by the petitioners are based on the contents of the documents tendered by the respondents which the petitioners have admitted, and which both the parties seek to interpret differently, and not on the basis of the averments made in the application under section 19 of the Act. Under the circumstances, the petitioners are not entitled to the plea of demurer. Whether even if the issues proposed by the petitioners are pure questions of law, can they be decided as preliminary issues as contemplated under Order XIV rule 2 of the Code? - HELD THAT:- In the facts of the present case, the petitioners have not contended that the Tribunal lacks the jurisdiction to entertain and decide the application under section 19 of the Act; the preliminary issues raised by the petitioners do not touch upon the jurisdiction of the Tribunal to decide the application made by the respondents; and it has also not been contended that the proceedings are barred by any provision of law. Under the circumstances, considering the nature of the issues raised by the petitioners as preliminary issues, even if the same were pure questions of law, the same would not fall within the scope and ambit of Order XIV rule 2 of the Code - this court is in agreement with the view adopted by the Debts Recovery Appellate Tribunal and does not find any legal infirmity in the impugned order so as to warrant interference. The petition, therefore, fails and is, accordingly, dismissed. Issues Involved:1. Jurisdiction of the Debts Recovery Tribunal (DRT).2. Payment of adequate court fees.3. Locus standi of the respondent banks.4. Consideration for personal guarantees.5. Nature of personal guarantees.6. Due date and commercial operation of the project.7. Prematurity of the claim.Detailed Analysis:1. Jurisdiction of the Debts Recovery Tribunal (DRT):The petitioners challenged the DRT's jurisdiction, arguing that the issues raised were purely legal and should be decided as preliminary issues. The court held that while the DRT is not bound by the Code of Civil Procedure (CPC), it should be guided by principles of natural justice and has the power to regulate its own procedure. However, the court noted that the DRT should not ordinarily decide issues as preliminary issues unless they go to the root of the matter and strike at the jurisdiction of the Tribunal. The court concluded that the issues raised by the petitioners were mixed questions of law and fact, not purely legal questions, and thus, the DRT was correct in not treating them as preliminary issues.2. Payment of Adequate Court Fees:The petitioners contended that the original application could not proceed without the payment of adequate court fees. However, during the pendency of the petition, the respondent banks deposited the so-called deficit court fees without prejudice to their right to contend that the initial court fee paid was adequate. As a result, this issue became academic, and the court did not delve further into it.3. Locus Standi of the Respondent Banks:The petitioners argued that the respondent banks had no right to sue on the personal guarantees as there was no privity of contract between the petitioners and the banks. The court held that determining whether the banks had the right to sue required examining the personal guarantees and the COR Facility Agreement, which involved ascertaining facts and then applying the law. Consequently, these were mixed questions of law and fact, not purely legal questions.4. Consideration for Personal Guarantees:The petitioners claimed that the personal guarantees were void for lack of consideration. The court noted that this issue required examining the documents to ascertain whether the guarantees were backed by consideration and the nature of such consideration. This process involved both factual and legal determinations, making it a mixed question of law and fact.5. Nature of Personal Guarantees:The petitioners questioned whether the personal guarantees, not being tripartite agreements, could be considered guarantees under Sections 126 and 127 of the Indian Contract Act. The court held that this issue required examining the personal guarantees and the Facility Agreements to identify the parties involved, which again involved mixed questions of law and fact.6. Due Date and Commercial Operation of the Project:The petitioners contended that the due date for repayment had not arrived as the project had not commenced commercial operations. The court found that determining the due date required examining the documentary evidence and the relevant clauses of the agreements, making it a factual question.7. Prematurity of the Claim:The petitioners argued that the claim was premature as the project had not commenced commercial operations and no amounts were due. The court held that this issue involved examining the documents and determining the facts, making it a mixed question of law and fact.Conclusion:The court agreed with the DRT and the Debts Recovery Appellate Tribunal (DRAT) that the issues raised by the petitioners were mixed questions of law and fact and could not be decided as preliminary issues. The petition was dismissed, and the interim relief granted earlier was vacated. The court declined the petitioners' request to stay the operation of the judgment to approach a higher forum.